In recent months, 2 of the most important banks in the United States collapsed into bankruptcy. Both financial institutions had been among the most famous and triumphant in the country. However, with the economic crisis this year everything changed. Despite this, many people still do not know the reasons for failure.
The reality is that there are many reasons why these 2 banks ended up closing their doors. However, certain causes ended up generating a greater impact than others. Similarly, it is necessary to know all the details that led to this decline. Here at The Look, we will show you the reasons for the closure of these organizations.
The story behind the most successful banks and their decline
Despite being 2 successful banks with decades of operation, Silicon Valley Bank and Signature Bank are bankrupt. Both collapsed due to a series of internal and external errors. Consequently, the Federal Reserve closed both banks a few months ago. This caused their customers to lose access to their saved funds.
The closure of Silicon Valley Bank was caused by all the lost loans and a poorly managed client portfolio. This is because the financial institution was focused on offering services to technology companies and startups. In many cases, these companies and ventures ended up failing and wasting money.
On the other hand, Signature Bank provided its services to cryptocurrency companies. Unlike Silicon Valley Bank, these did not comply with government regulations. Because of this, they were penalized by heavy fines and penalties that they could not cover, which caused their immediate closure.
Economic consequences of the closure of these banks in the United States
Although both financial institutions closed recently, there are already significant consequences on the country's economy. The entire financial industry was negatively affected by the failures of these banks. However, the most affected by this situation were the customers of both banks.
The U.S. government guaranteed the deposits of the clients of both banks. But there is still a great deal of uncertainty at the moment. Especially since many people had all their savings invested in these banks. Therefore, these are in a strong economic crisis at the moment.
And worst of all, many financial experts believe that the worst economic consequences are yet to come. In the coming months and even years, the country's financial situation may continue to worsen. Not only because of the economic destabilization but also because of the lack of confidence that exists in the public towards the banks.
Lessons Learned from bank closures and their impact
It is essential to learn from mistakes, even in the worst of times. With the closure of Silicon Valley Bank and Signature Bank, new regulations need to be implemented. The State must propose measures to prevent the occurrence of bank closures. In addition, the security of the banking system must be ensured.
In addition to this, banks also need to change the approach they have at the moment. Work must be done in less risky areas to reduce the frequency at which these financial declines occur. At the same time, they need to better manage the associated risks. Otherwise, mistrust will continue to increase in society.